The Centre has revised the definition and recognition norms for startups, with a sharper focus on deep tech startups, through a notification issued by the Ministry of Commerce on Thursday. The move seeks to widen the eligibility net for companies, especially those working on cutting-edge technologies, to qualify for official startup status.
Under the revised norms, a startup is defined as an entity within 10 years from the date of its incorporation or registration, with turnover in any financial year since incorporation not exceeding Rs 200 crore. For entities recognised as deep tech startups, the eligibility window has been extended to 20 years and the turnover threshold raised to Rs 300 crore for any such financial year.
The ministry has also issued separate guidelines for deep tech startups. To qualify, an entity must be developing solutions based on new or emerging scientific or engineering knowledge, incur higher expenditure on research and development, and either own or be in the process of creating significant novel intellectual property.
Safeguards have been built in to prevent misuse of the startup tag. Entities formed through the splitting up or reconstruction of an existing business will not qualify. Startups, including deep tech startups, are also barred from investing in real estate (commercial or residential), automobiles, and jewellery. They are prohibited from engaging in lending activities, except where lending is a substantial part of the business model.
“Inclusion of the deep tech category in the notification signals that India is prioritising deep tech startups to move from a nation of technology adoption to one of technology innovation. The list of non-permissible asset investments for startups has largely remained unchanged, except for the addition of assets or activities of a speculative or non-productive nature, as may be notified by the Central Government,” said Sandeepp Jhunjhunwala, M&A Tax Partner at Nangia Global Advisors.
The notification also clarifies that the government may relax or modify one or more conditions under special circumstances.